Growing Up Gardner
Part 2

By Selena Maranjian (TMF Selena)
April 11, 2000

When were you first introduced to the stock market and investing, and how was it presented?

David: All throughout our childhood, investing just seemed like a natural part of life. Both our father and grandfathers invested. It didn't consume their lives -- they had jobs and families and all that. It was just something they did -- no big deal. The stock market was where you'd put your money for the long term, and the more you got into it the more successful you'd be. I don't recall many -- if any -- Depression-era horror stories told by my grandparents.

How was investing made interesting and compelling to you?

Tom: It was pretty simple: We learned that when we owned a company, we wanted that business to succeed. Therefore, as investors, we wanted to look for companies that we felt would be successful -- perhaps for our entire lifetime.

We never really looked at stock prices that often. I don't recall thinking about a stock's price too much or about how much it had risen or fallen. I mostly remember that we'd discuss a company's products and services and people -- we loved to joke about these. We've definitely become more quantitative over time, but our investing has always included banter about a company's product or people -- and how interesting (and occasionally, how amusing or even frightening) they are.

David: Well, I remember we'd be at a supermarket with our dad and he'd point out the pudding and say something like, "Hey, kids, see this? Chocolate pudding. We own this company! So let's go get more chocolate pudding!" Made him a very popular dad, and he was making a key point.

Value Line put the numbers to the stories, and we've always been number fans so I guess even the big black book played a part in making investing compelling, as did having my own brokerage account. And of course, that fourth grade contest! I think that if kids are brought up to enjoy math, they should enjoy the stock market.

What were your early investing experiences, and how old were you?

Tom: I mostly remember discussing a company's products and services and the people behind them. Our father owned shares of Washington Post for 30 years. Growing up in Washington, D.C., we saw that natural connection between a newspaper we read every day and a newspaper whose shares we owned.

In what ways were either of your parents involved in your early investing experiences?

Tom: Well, when we each turned 18, our parents gave us some money to invest, so that we'd make some of our own decisions. They recognized that we'd make mistakes, even some bad ones. But they felt it was important for us to become investors as early as possible. To understand the mentality. However little or much parents can give to their kids, I think it's worthwhile. It'll get them thinking as investors at a young age.

Now, at the age of 18, I actually had other interests in my life, so I didn't do much investing at all. Dave really took to it, though, exploring, making early mistakes, learning very quickly from those mistakes. By the time he'd reached his early twenties, he'd created an investing system. The Motley Fool has, in large part, grown out of the investment scholarship that Dave carried out at a young age.

David: Yes, at 18, dad gave us money -- it was actually our entire inheritance from our parents, in the form of a stock portfolio. They'd created the accounts when we were born and dad had been adding money and investing the funds in stocks for 18 years. We were told that this was it -- we were to manage it ourselves. He was there to help us, though, of course, whenever we needed him. We were told that whatever of our parents' money that was left after they died would be going to our own children -- their grandchildren. (Skipping a generation when bequeathing money has some tax advantages.)

I'd suggest that all parents, to the extent that they can, should consider doing something similar. When we took over our portfolios we naturally left some of the investments dad had made in place -- and picked some of our own stocks, too. I had some success early on with TCBY, the yogurt company.

Did you feel different from your friends and peers regarding your knowledge of and experience with money or investing?

David: I didn't think so at the time, but looking back now, I think we did have a different outlook. I don't think our friends' parents were doing what my dad was doing with us -- teaching us about business. Many of our friends' parents were journalists or in politics -- few were in the financial world or working in traditional corporations. I think parents who are working for consumer businesses have even more lessons they can easily impart to children about investing.

David, you have children now. How are you teaching them about money and investing?

David: Well, they're still pretty young. So far, I set up a brokerage account for each of my children when they were born. I've invested them in stocks. I began by regularly adding money to the accounts, but now I'm transferring stocks -- that makes more sense. Parents can each give up to $10,000 per year to each child, you know.

What I've done with my oldest, who's five, is involve her in discussions about capitalism -- which, contrary to what you might think, are really fun! I'll say, "How do you think that bread got on that shelf in the supermarket?" She'll answer that "Someone put it there." I'll ask, "Who did that? Why?" Eventually I get around to explaining that we have things on shelves because people make money doing that. They need to make more than they spend. If they don't, we won't have bread.

The discussions are unpretentious, uncomplicated. It's what I'm trying, for now -- and it looks to be effective. I ask "Why?" questions, which so often leads into discussing business. Even looking out this window here now, at the street below, the stores, the cars -- almost everything I see except the trees is in some way a product or service provided by a company I can become a part owner of. That's the miracle of the stock market.

Do you have any advice for parents who want to raise children interested in the stock market?

Tom: Sure. Here are a few ideas:

  1. Explain with simple examples the power of compounded growth.

  2. Encourage them to be intellectually curious about the world around them and to have fun learning about the businesses that serve us.

  3. Connect public companies with the natural interests of your children. If they're into fashion, talk about Tiffany's, Gap, or Abercrombie & Fitch. If they're into computers, explain Microsoft's business and Cisco's work to link computers together. No matter what their interests are, there are public companies providing products that serve those markets. There are intellectual rewards to doing so as well!

  4. Encourage them to make decisions by giving them a little money to invest or invite them to help you manage a small custodial account. Were I to do this, it would be an offer to the kids with no strings attached. I'm a believer in saying to kids, "Let me try to teach you, and if you want any more lessons come to me -- but it's your life to live." Set aside enough money that it'll interest them, but not so much that they can bring the family's financial plan to its knees!

  5. Advocate to your children the idea that money is one of many tools to improve the quality of their lives.
David: Some more thoughts:
  1. Teach your children about capitalism.

  2. Get them asking "Why?" questions and being curious about the world. This should naturally lead to an interest in business and an understanding of what business is.

  3. To the extent that you can, engage them with colorful and imaginative lessons.

  4. Always look for connections -- give your children connections. Help them relate to your or their portfolio via companies they're familiar with. Connect chocolate pudding to becoming a part owner of a growing business. Perhaps have your children receive investment-related mail -- addressed to them -- or a bank account statement with their name at the top.

  5. Teach them that money is synonymous with opportunity.
Related Link:
The Family Fool